Why Rajiv Thakkar’s current strategy favors large-cap stocks

“We have an indicator that tracks a large cap index versus a small cap or mid cap index. While we are not at the top and there has been relative improvement in the mid and small cap space, they are still not below average in terms of valuations. So, right now, even after the correction, the positions are slightly above average, but they are not at attractive levels,” Thakkar said during an interaction. Peppermint For Guru Portfolio Series. In this series, leaders in the financial services industry share how they are handling their finances and investments.

asset allocation

Thakkar’s asset allocation has remained largely the same over the past year, except for his debt exposure. It has come down from 4% earlier to around 2%.

Thakkar says he used his contingency fund to buy shares of his fund house that were offered by other employees. He says that this contingency fund had a corpus that could cover two years’ expenses. Now though, even after the share purchase, it can still account for more than a year’s worth of expenses.

Apart from liquid funds, Thakkar’s investments in Employees’ Provident Fund and bank fixed deposits (FDs) account for the rest of his debt allocation.

After the share purchase, his allocation to equity has increased from 82% to 84%. It remains at 13% for real estate, while gold – which is held in physical form – is at 1%. They say that gold has been going on for generations. Thakkar does not consider real estate as an investment, especially his self-occupied property.

A major chunk of Thakkar’s allocation is concentrated in some form or the other in PPFAS MF. He says that around 66% of his equity portfolio is in unlisted shares of PPFAS MF and 33% in its flagship scheme – Parag Parikh Flexi Cap Fund. Around 1% is in other schemes. These include Parag Parikh Liquid Fund, Parag Parikh Tax Saver Fund and Parag Parikh Conservative Hybrid Fund. He also has some exposure to liquid funds of other fund houses.

Thakkar acknowledges his portfolio’s mega exposure to PPFAS MF but claims it was not part of any equity investment strategy. He says, “Wherever people have this kind of entrepreneurial approach to their own business or where they are part of a key management group, the company itself becomes someone’s net worth because of ESOPs (employee stock options). becomes an important part of the value.

Parag Parikh holds the bulk of Thakkar’s listed equity investments in flexicaps. The fund has approximately 10% exposure to domestic mid and small caps and 58% to large caps. About 17% is in international equities. The rest is invested in cash and debt instruments.

Thakkar says his portfolio has given an overall return of 2-3 per cent in the last one year.

stays on the radar

Thakkar does not have any alternative investments directly. He says that fund houses do track domestic companies in the unlisted space, but this is mainly done to identify and screen companies that could be competitors in the listed space or have strong market share. Has the potential to be listed.

While Thakkar doesn’t plan to look at real estate as an investment, he says REITs (real estate investment trusts) appear to be an interesting segment. “We have a small exposure to REITs through our conservative hybrid fund, in which I have a small exposure. If we were looking to invest in real estate, perhaps REITs would look at that space,” he says.

Parag Parikh Conservative Hybrid Fund has around 7 per cent exposure to REITs.

investment approach

Thakkar’s approach to equity investing is to maintain a long-term investment horizon and wait for good investment opportunities.

As a fund manager, they look for investments at attractive valuations, especially in companies that are backed by quality management and businesses.

“One way to approach this is statistical value, where the value of a company’s assets is 100 but the value of the firm itself is 50. So, it’s cheap. The traditional way of doing things is to look at factors like low price-to-book or high dividend yield or low price-to-earnings etc., which is what Benjamin Graham (the father of value investing) taught for many years. Back. The downside is if the management of the company is wrong or there are some problems related to its business or any other problem. Then the valuation of the company whose prices are rising 50 and will go down. Ideally, you want a combination of both; A good management and a significant discount,” he says.

Regarding long term investment strategy, he says that “Various factors, volatility in markets due to interest rate fluctuations, geopolitics etc., can all affect equity prices. Hence, one must look at a five-year plus horizon to really benefit from equity.”

advice to investors

Thakkar has a piece of advice for investors, especially in the current market environment: Have modest expectations about returns and don’t unnecessarily tinker with investments that could lead to tax evasion.

He says that earlier there was zero Long Term Capital Gain (LTCG) on equity and indexation benefit on debt funds for LTCG. “Now, when everything is taxable and at slightly higher rates, tinkering with your investments will often lead to tax leakage. Either keep your money in hybrid funds and don’t redeem them. -Don’t change too often. Even if you get those shifts right, most of the gains will go to taxes. So, maintain a stable asset allocation and let things grow over time,” he says.

However, says Thakkar, “given the imperative to contain inflation, slowing things down and an environment like rising interest rates, investors should not expect very high returns in equities.”

“If India grows somewhere around 6% or so and we have an inflation of 5%, then nominal GDP (gross domestic product) growth will be around 11%. Corporate profits could be around 11%. So, somewhere in double digit returns would be possible, but equity returns are not guaranteed and can vary greatly,” he says.

“Just because bank FDs are offering 7-7.5% interest rate, you cannot have an unreasonable expectation of 20-25% from equity. The lower the expectations, the better for investors. If the future returns are higher, you’ll be happy anyway. If the expectations are low, the chances of disappointment are low.”

family and lifestyle

Thakkar’s wife, Hemangini Thakkar, is also a finance professional working in the mutual fund industry but favors risk-management. My family is well aware of what is happening in our investment portfolio, but the investment decisions are largely left to me.

Thakkar says it’s important to take care of your health as you age. He says that he has been doing intermittent fasting for the last 2-3 years and has reduced his intake of carbs. He rarely goes to the gym as he finds it a bit boring, but walks regularly. He is exploring dance forms like Zumba as a way to exercise and stay fit.